Cape Town boosts SA consumer confidence
29 October 2014
by IT Online
South African consumer confidence has improved for the second half of 2014 – largely due to Cape Town’s positive outlook.
This is according to the latest MasterCard Index of Consumer Confidence released today.
With a score of 58.7, a slight improvement of 2.4 points compared to last year’s score of 56.3, the Index currently describes consumer confidence as “neutral-positive”.
Now in its 11th year in South Africa, the MasterCard Index of Consumer is based on a forward-looking survey which measures consumer sentiment and expectations of the country’s performance using five economic indicators: economy; employment; stock market; regular income; and quality of life.
The Index score is calculated with zero as the most pessimistic, 100 as the most optimistic and 50 as neutral.
Cape Town’s optimistic score of 63.7 is a substantial upturn from the city’s pessimistic score of 34.2 points in 2013. Johannesburg recorded the largest dip in consumer confidence, down 12.5 points to 57.4 in 2014, while Durban’s score declined 3.1 points to 52.2.
“The sharp improvement in optimism recorded for Cape Town contrasts consumer perception in Johannesburg and Durban,” says Mark Elliott, division president, MasterCard, South Africa.
“What is interesting is that Cape Town, the most pessimistic city in the 2013 Index, is now the most optimistic. If one were to omit Cape Town’s score from the overall South African consumer confidence figure, the Index would show a significant year-on-year decline in consumer confidence.”
Independent economist and CEO of Frontier Advisory Dr Martyn Davies attributes the uptick in Cape Town’s consumer sentiment to improved public sector governance in the Western Cape.
He says Johannesburg, the industrial and commercial heart of the South African economy, has borne the knock-on effects of protracted, damaging strike action and reduced consumer spending, negatively impacting consumers’ overall economic outlook.
Looking at the five indicators, the most significant shifts occurred in consumers’ impressions of the two indicators that affect them personally. Quality of Life increased 3.4 points to a neutral 53.9 and Regular Income increased 8.1 points to a very optimistic 77. Compared to the other indicators, Regular Income recorded the highest increase in optimism compared to the 2013 Index.
Davies says South Africans have traditionally remained optimistic about Regular Income, which points to relative stability in the labour market thanks to legislative protection offered to the employed.
The only indicator to decline in 2014, Economy scored a neutral 51.4, a decrease of 2.7 points from 2013.
“Perceptions of Regular Income may be very positive, but South Africa’s economic outlook is undoubtedly subdued,” says Davies. “This speaks to the divided economy we have in South Africa – the polarisation of the haves and the have-nots.”
This year, South African consumers are only marginally more positive regarding Employment, up 1.5 points to a neutral 56.2, and Stock Market, up 1.4 points to a neutral 55.
Comparing the African countries surveyed, the country with the lowest consumer sentiment is Kenya, plunging from an optimistic 76.5 to a pessimistic 38.8. Nigeria remains the most optimistic (95.8), followed by Morocco (79.6) and South Africa (58.7). While overall expectations of Africa’s prospects have fallen 8.3 points to 70.8, respondents are still optimistic about the continent’s outlook.
Davies says that in Kenya’s case, persistent security concerns culminating in the terrorist attack targeting the Westgate Mall in September 2013 have collapsed local and international business confidence.
“There are growing concerns regarding the economic impact of the Ebola outbreak in West Africa, which will undoubtedly affect consumer confidence in that region. This may be reflected in Nigeria’s score in future editions of the Index,” says Davies.
“It’s encouraging that South African consumer sentiment for the next six months is neutral-positive. However, the South African consumer confidence level is still off its historic peak of 91.1 points in the second half of 2006.”
The Index is based on a survey conducted between July and August 2014, involved 4,487 banked respondents aged 18 to 64 in Egypt, Kenya, Kuwait, Lebanon, Morocco, Nigeria, Oman, Qatar, Saudi Arabia, South Africa, and the United Arab Emirates.
IT Online